So Obvious It Goes Without Saying? An Argument for the Singaporean Approach to the Implication of Terms in Fact Mitchell Allan Heslip A dissertation submitted in partial fulfillment of the degree of Bachelor of Laws (with Honours) University of Otago October 2017 1 Acknowledgements I would like to thank: Dr Simon Connell, my supervisor, for introducing me to this fascinating area of law. His guidance and insight on this topic were invaluable to me and greatly appreciated; And my friends, family and flat mates this year, for putting up with me through this. 2 Table of Contents I Introduction .................................................................................................................................. 4 II The Classical Approach .............................................................................................................. 6 A Interpretation ........................................................................................................................... 6 B Implication ............................................................................................................................... 8 1 The classical approach to implication summarised by the threefold framework ............... 11 III The Contemporary Position: Changing Tides and the Great Divergence................................ 13 A Interpretation: 1990’s – Present: Changing Tides ................................................................. 13 1 ICS and the modern approach to contract interpretation .................................................... 13 2 Post ICS Developments ...................................................................................................... 15 B Implication: The Great Divergence ....................................................................................... 17 1 Belize Telecom - The Unitary Approach ............................................................................ 18 2 The Singaporean Approach ................................................................................................ 22 3 Marks and Spencer - The English Approach ...................................................................... 27 4 Summary of the Great Divergence ..................................................................................... 29 IV Evaluation and Selection Criteria ............................................................................................ 31 A Reconciliation: Why the Circle Cannot be Squared .............................................................. 31 B Why the Singaporean Approach Should be Adopted in New Zealand ................................. 33 1 Coherence ........................................................................................................................... 34 2 Workability ......................................................................................................................... 36 3 Suitability............................................................................................................................ 39 V Conclusion ................................................................................................................................ 42 Bibliography ................................................................................................................................. 44 Appendix ....................................................................................................................................... 49 3 I Introduction Attorney General of Belize v Belize Telecom Ltd (Belize) has transformed the law of implication of terms in fact from well settled to highly contentious.1 Terms implied by fact are terms that, despite not being expressed by the parties, are still part of the contract. They can occur when the express terms of a contract offer no guidance on a situation, leaving a gap in the contract. The substantive content of such a term arises from the presumed intentions of the parties.2 The debate in implication revolves around the decision in Belize, but in distinct ways. Firstly, whether Belize represents a change in the law of implication. Secondly, the desirability of any change Belize represents. There is also a further issue of what subsequent cases stand for themselves. The reason the debate in implication has been so contentious is because there has been a failure to distinguish these arguments. This arises from the absence of a consistently applied conceptual framework. This dissertation will use a consistent framework to assess the different approaches to implication. This framework breaks the analysis into three distinct, but related questions: 1) Is there a distinction between express terms and implied terms? 2) Are the principles of interpretation and implication distinct? 3) What is the specific methodology for the implication of a term? This dissertation is in five chapters. Chapter Two will set out the understanding of implication before Belize. This is referred to as the classical approach because it precedes the current debate initiated by Belize. Chapter Three will set out the differing approaches to implication that have emerged following Belize. These are the unitary approach, the Singaporean approach and the English approach. This is referred to as the Great Divergence due to the emergence of different approaches to implication. Chapter Four will evaluate these approaches and conclude that the Singaporean approach is preferable. 1 Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] BCC 43 [Belize]. 2 In contrast with terms implied by law, which are imposed upon a contract by statutory or common law policy imperatives (see Geys v Société Générale [2013] 1 AC 523 (CA) at [55].) Terms implied by law have different sources and principles than terms implied by fact. This dissertation is solely about terms implied by fact and references to ‘implication’ herein mean implication of terms implied in fact. 4 It is an appropriate time to consider the issue of implication in New Zealand. The law remains very unclear at the appellate court level.3 Moreover, trial courts are asking for guidance,4 or recognizing the lack of clear authority.5 This situation should be remedied. 3Mobil Oil New Zealand Ltd v Development Auckland Ltd [2016] NZSC 89 at [76] – [81]; BDM Grange Ltd v Trimex PTY Ltd [2017] NZCA 12 at [67]; Matthew Barber “Implied terms” [2013] NZLJ 238 at 240; Simon Connell “Interpretation and implication” [2017] NZLJ 71 at 72. 4 The Rintoul Group Ltd v Far North District Council [2017] NZHC 1132 at [26] – [29]. 5 Body Corporate 74246 v QBE Insurance (International) Ltd [2017] NZHC 1473 at [47] – [48]. 5 II The Classical Approach Understanding the current debate in implication requires an understanding of the enormous changes that occurred in ‘construction’ in the latter half of the 20th Century.6 Construction, in the law of contract, is an umbrella concept and is concerned with determining the meaning of a document.7 Within construction, in the classical approach, were three distinct areas of law with distinct rules: Interpretation, Implication and Rectification. These areas had a clear order of occurrence. Interpretation necessarily preceded both implication and rectification. Interpretation set out the meaning of the contract given the express terms. From there, implication could fill gaps left by interpretation with implied terms. Rectification could correct an interpretation not in accordance with the parties’ true intentions. Figure 1: Classical Conception of Construction A Interpretation Interpretation is about determining the meaning of the expressions used by the parties in a contract.8 In the classical approach there were two central rules of interpretation: The parol evidence rule and the plain meaning rule. The parol evidence rule was a rule of evidence in 6 John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (4th Ed, LexisNexis, Wellington, 2012) at 190 – 193. 7 Margaret Kniffin Corbin on Contracts (Revised Edition): Interpretation of Contracts (Lexis Law Publishing, Charlottesville, 1998) vol 5 at [24.3]. 8 At [24.1]. 6 contract disputes. It prevented a court from using extrinsic evidence to interpret the contract.9 The plain meaning rule made a court adopt the natural and ordinary meaning of the words used in the contract.10 There were exceptions to the rules, such as the ‘Private Dictionary’,11 and the ‘Trade Usage’ exceptions.12 These allowed the parties to define terms or use a specific context where those words were not used in accordance with their plain meaning. In a situation where the ordinary meaning of a document was ambiguous, the court could use extrinsic evidence. This may arise due to irreconcilable provisions in the contract or simply poor drafting making a sentence incomprehensible. This evidence could then be used to determine the meaning of the words used by the parties. These interconnected rules and exceptions made interpretation a narrow exercise that placed a lot of importance on dictionaries and grammar.13 In the 1970’s, Lord Wilberforce’s ‘factual matrix’ initiated an acceptance of contextual analysis.14 The factual matrix emphasised that the purpose and circumstances of a contract’s formation are important considerations when a court is interpreting a contract.15 This would appear to be a repudiation of the parol evidence and plain meaning rules at first sight. However, courts treated the factual matrix as subordinate to those rules.16 Use of